The Second Housing Bubble Ends With A Bang, Not A Whimper, David Stockman Warns

Following our earlier discussion of the echo-boom in housing, David Stockman appeared on Yahoo's Daily Ticker with Lauren Lyster to pour come much-needed cold water 'reality' onto the hopes of an increasingly sheep-like investing public. Homebuilder stocks up 100%-plus simply reflects that "we are in a bubble once again." The former CBO Director added that "in a world of medicated money by the central bank, things aren't what they appear to be," as he explained there is "no real organic sustainable recovery."

Stockman further contends, "It's happening in the most speculative sub-prime markets, where massive amounts of 'fast money' is rolling in to buy, to rent, on a speculative basis for a quick trade. And as soon as they conclude prices have moved enough, they’ll be gone as fast as they came." Critically, he points out we live in a world of boomers looking to be trade-down sellers, not one of trade-up buyers, as "the fast money will sell as quickly as they can and the bubble will pop almost as rapidly as it’s appeared.

He concludes that the American Dream of home-ownership 'forced' upon the citizens was a huge policy mistake as he chides, "let the market decide," as he clearly sees Bernanke recreating yet another speculative bubble.

Well that depends on whether your policy goals are the next 6 months of stability and so called prosperity or something lonegr term. Since last 4 administrations were incapable of thinking further ahead then the length of their dicks "at the time it seemed like a good idea". Just like qe.

I looked at property out in Eastern Tennessee, east of Knoxville. I liked it there. Only downside is air quality and the nuke plants (north). I figure air quality is going to get worse for some time as we head in to collapse, but eventually (hopefully there are trees left to hold the soils) it's got to improve. This area is buffered from hurricanes (Smokey Mountains blocks them- as far as I know) and less exposure to tornadoes (central and western TN really get them). Floods are bit of an issue on the mountains, but that's just the way it is.

Good call on having dogs. Dogs are the first security device you should have (mine wears two hats- protects the homestead AND protects our fowl). Note that bigger dogs tend to injure themselves; mine's about 80 lbs and runs like a fucking freight train- pulled up lame the other day (more vet bills in the future, sigh). If you can stand them, Guinea fowl are excellent alarms: kind of entertaining too; would be good in TN in helping keep down ticks; best, however, to keep them a bit of a ways from the house, as they DO get noisy (which, can work against you if you're looking to "hide"). And if you're going to keep chickens look to electrify your pen: our operations are totally portable, coop and electrified netting; this combo plus our dog = no losses to predation (aerial OR ground; have all kinds).

Hedge funds that control other people's money are the ones going for the bacon. But they are going in for the long haul. That is why I think Bass is wrong on parking his clients money there. Maybe there are no good places for large sums of money any longer.

Small money can buy night vision scopes, guns, food etc. But big money no. If you don't take responsibility over managing it yourself you may have some problems coming up.

Not like in the past, no. The pressures for returns are going to start tearing things apart, as seen with the latest suit against Black Rock.

"But big money no. If you don't take responsibility over managing it yourself you may have some problems coming up."

China, the big oil producers... imagine the scope here! Being flooded with USD and where to funnel it? Can you say Hot Potato?

The bigger they are the harder they'll fall. Eventually the field will shrink until it's down to two titans. If it ever does get to this point I'd like to think that there's no one left who doesn't see that this isn't going to turn out well...

I live in Seattle. We have a highrise apartment building boom in downtown Seattle. Cranes every where. Cheap money deployed to once again over build the market. I don't know who is going to be able to pay the rent and where all the renters are going to come from. Headlines in newspaper today touting not enough money for the 5600+ homeless people in the area. Property taxes, bridge tolls, tunnel tolls, HOV lane fees, head tax on employees, tax on office space, all going up and now they are thinking about highway taxes based on the miles one drives. Not much left over for rent.

High rise apartments in cities will be the new normal. Freeing up the rural property from ownership will help global warming, according to the UN Agenda 21 (nonbinding) - who is going to each and every country, offering grants to struggling municipalities (binding) - rezoning, redevelopment so the NWO can provide "sustainable lifestyles" to their descendents and the rest of us (the slaves).

"We are in trouble. We have a few years at most...years, not decades."

China (1-child policy- ghost cities (not) are Agenda 21 plans - the cities will be filled with the people from the countryside eventually. (they have a web site stating same. Google it, it is not hiding from anyone. Facebook has agenda 21 plan. it sounds so pretty but what isn't stated is the facts that are presented here by these BRAVE WOMEN WHO HAVE COME FORWARD IN SPITE OF THE REPERCUSSIONS OF GETTING IN THE WAY OF THE MOST POWERFUL PEOPLE IN THE WORLD.

No one is talking about this. Jokes and accusations of conspiracy theorists gone wild are abundant but is is on the United Nations web page for everyone to see.

This is called a "profound reorientation of human lifestyle" and when that comes from a group who are well known to be behind the wars, the 9-11 attack and the collapse of nation after nation's economies, you'd better sit up and take notice or go to the grave knowing you've left your beloved children a world in which he has no choices.

I hope you will take the time to investigate this. zerohedge may ahve an article on this; if so, I haven't seen it. Agenda 21 is behind every decision being made. It's the foundation for the NWO. New names when the conversation by the cattle gets too hostile has occurred but there is nothing stopping these people.

I've said it before and I'll say it again: BAD SYSTEMS FAIL. If the "Agenda 21" "system" is so bad (and the idea isn't exactly in line with my thinking), then why the hell do people spend so much energy over this? Do people NOT recognize that things are pushing apart instead of together? It's more administrative overhead when there's no energy to support it.

That "some" may want this, and that that "some" may have a lot of power, wanting and getting are two different things. The world is far too complex.

I can separate different issues, such as humans desire for power (and, for some, benevolence) from climate change. Someone (POWER) ALWAYS profits off of things, whether those things are "good" or "bad."

China's policy is a lure of control. It likely has little to do with any "Agenda 21" whatever. It's just plain old political manipulation to keep the ruling elite propped up. Humans, like so many other animals, tend to be attracted to things that glitter, and cities tend to have a lot of glitter.

Bottom line: Earth is a sphere, in which case it's resources are limited- the numbers of humans that it can support is limited. Humans are burning through a lot of reserves (just like they've been burning through credit). These are facts, "Agenda 21" or not. Anyone with any intelligence has to ask what will happen with the lot of us if we continue as we have. Again, there will ALWAYS be people that are looking to profit off of whatever, and just because this is the case that don't mean that the thing itself is sinister (because of profits, though greed IS greed).

I wonder whether this was stuff that was on the drawing board pre-2008? It takes MANY years to plan, arrange financing and then construct these things. At some point folks just decide to carry on with the project. And with interest rates essentially making money free I figure this tends to make all these folks have tunnel vision (thinking we'll all come out of this down-cycle ready to rock-n-roll).

I continue to marvel at what's happening up in Vancouver, B.C.. There are, however, some cracks starting to appear.

It's really pretty par for the big-city types. That's where the money is. And that's where technology springs forth from: those who salivate over technology need to make this connection; it's why I do NOT believe that technology can save us (and instead believe that it's the thing that will enslave us).

Cheer up. If you think it's bad there you ought go to Manila. Here's an area that's not to far from where my wife was born:

What Jurow Is Much MoreConsistent With Than IsWachter, And, For Me, HowWe Best Know The Real Estate Crash Is Sill On:Remember:You Would Be Getting MoreThan Nothing On Your Safe Money (Remember?When You Wake Up, AndGo To The Bank, You'll Learn Your Safe Money's IsEarning Nominal Interest And Negative Real Interest) If The Banks Didn'tNeed Bernanke's CarryingOf Their Own Self-CreatedBubble (Still.)(4 Years Of That Now. It Looks Like Wake Up, Go ToThe Bank, Find No InterestOn Savings This Year Too.)

"...Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate...."Mish's Global Economic Trend Analysis, 2/1/2013

It's As Though Open Source Got Eaten By Paid Software, Which Imposed Contracts Extracting Huge Profits, But Then Adding All Manner Of Everything Wrong To Doctors'And Patients' Lives, And EspeciallyTo The Task Of Health Maintenance.

Just a sec. He said buyers were coming in with cash, then later goes on to say it's cheap money at low interest rates that's fuelling the bubble. That's a non sequitur. Which is it? Are they borrowing in advance and then buying the properties with said cash with no encumbrances on the property?

I didn't notice because they're not contradictory. X% buy with cash and Y% use cheap financing, I don't remember the percentages. Or like you suggest you could do a combination of both. A prop I purchased in 2011 was paid partly with a 5% variable rate HELOC on my primary residence. Then I refinanced it into a 7/1 ARM at 3%. Paying all cash allowed me to purchase the prop at a discount since it was an REO, and the bank knew it would close quickly.

I agree with Stockman that certain areas are now in the process of re-entering bubble territory, and the bubble will burst. The question though is at what level will housing prices head downward. It could be at much higher prices than currently, depending on the area.

I disagreed when he said rising interest rates would necessarily cause housing to drop. More important in my mind is the level of real interest rates. If monetary velocity starts picking up and overall prices continue rising, we could end up with a situation like the 70's where home prices and nominal interest rates went up. Homes didn't keep up with inflation, but combined with a low fixed interest rate loan one came out ahead if you purchased in the early 70's. If interested, see Daniel Amerman's free mini course for details. According to him, that's what bankrupted the S&L industry since they had to start paying higher interest rates to depositors than they were receiving from the loans.